In a decision that is largely favorable to copyright owners, Judge Pauley of the Southern District of New York granted in part a motion by plaintiffs EMI, Inc. and fourteen other record companies (together, “EMI”) requesting reconsideration of its 2011 decision in Capitol Records, Inc. v. MP3tunes, LLC, which dismissed most of EMI’s contributory copyright infringement claims against music search and “locker” service MP3tunes. While reconsideration is very unusual, Judge Pauley found that the Second Circuit’s intervening decision in Viacom International, Inc. v. Youtube, Inc., merited re-assessment of the case under the Second Circuit’s stated standards in cases involving those seeking to avail themselves of the safe harbor provided in the Digital Millennium Copyright Act (DMCA). For more information about the Viacom decisions, see our previous analysis here and here.

Viacom Requires That a Court Engage in Explicit Fact-Finding on the Issue of a Defendant’s “Willful Blindness.”

EMI argued that, under the Second Circuit’s Viacom decision, district courts cannot create bright-line rules or dismiss a claim without engaging in direct fact-finding on the issue of “willful blindness” to infringement before determining whether a party is eligible for protection under the DMCA safe harbor provisions. The Court agreed. Although it noted that Viacom “offers little guidance” for reconciling the tension between the doctrine of willful blindness and the DMCA’s “explicit repudiation of any affirmative duty on the part of service providers to monitor user content,” the Court found that sufficient evidence was available that could persuade a reasonable juror that MP3tunes was required to make inquiries into “specific and identifiable” instances of infringement. For example, one email contained a confession to MP3tunes that everything the sender posted was infringing. To the Court, under Viacom, evidence of this type could be enough to warrant sending the case to a jury, rather than dismissing the case on summary judgment as the Court had done previously. For an overview of a recent ruling in the contributory trademark infringement context, in which the court similarly held that the question of knowledge and willful blindness was one best-suited for trial, please see Eleanor M. Lackman’s article Decoding Rosetta Stone on Bloomberg BNA..

The Court rejected MP3tunes’ argument that its adoption of a repeat-infringer policy insulated it from the possibility that willful blindness existed nonetheless. It clarified that MP3tunes’ ability to identify repeat offenders “does not mean that it never looked the other way when confronted by a high probability that certain conduct was infringing.” Under Viacom, the imputed knowledge of a willfully avoided fact may impose a duty to make further inquiries “that a reasonable person would make,” and it would be up to the jury to decide whether MP3tunes had such a duty and avoided it.

Viacom Holds That “Red Flag” Knowledge of Infringement May Be Established by Evidence Other than Formal Takedown Notices.

The Court also, albeit “reluctantly,” found that Viacom requires that the “red flag” (actual or apparent) knowledge standard that would remove the safe harbor could be established by more than just formal takedown notices. Although the Court was wary of the potential conflict between the DMCA’s disavowal of any duty to monitor, informal notice, such as internal or third-party communications, could be enough. EMI had offered communications acknowledging specific instances of likely infringement, which, under Viacom, would warrant a reversal of the grant of summary judgment for MP3tunes and warrant a trial instead.

The DMCA Still Applies to Inducement Claims

Drawing upon a footnote in the Second Circuit’s Viacom decision, EMI argued that the Viacom ruling confirmed that inducement of copyright infringement constitutes a separate cause of action, distinct from contributory copyright infringement. The footnote in question cited to the Grokster decision and stated that “doctrines of secondary copyright infringement include contributory, vicarious and inducement liability.” In requesting that the Court revive its previously dismissed inducement claim as a separate cause of action, EMI argued that the DMCA safe harbor provisions cannot shelter a defendant from an inducement claim because “the intentional nature inducement is incompatible with the basic premise of DMCA immunity.”

Stating that it is aware of no authority for the notion that the safe harbor provision is “per se unavailable” in an inducement claim or that evidence of inducement would obviate the requirement to prove actual or red flag knowledge, the Court stated that case law “indicates only that inducement conduct may be relevant to establish an exception to safe harbor protection such as actual or apparent knowledge of infringement.” The Court also stated that EMI had not met the “high degree of proof” required for an inducement claim and therefore denied EMI’s request to revive the inducement claim as futile.

MP3tunes’ Motions

In addition to ruling on EMI’s motion for reconsideration, the Court addressed reconsideration and summary judgment motions submitted by defendant Michael Robertson, CEO of MP3tunes. Robertson argued that the Viacom decision required reconsideration of the Court’s prior ruling regarding his alleged infringement of EMI’s copyrighted cover art. MP3tunes had entered into a license with Amazon to display the cover art for the principal purpose of driving traffic to Amazon’s website. EMI claimed that MP3tunes directly infringed its copyrights in the cover art in breach of the licensing agreement. The Court’s previously found that question of fact precluded a ruling because of “contradictory proof” on certain key issues.

Robertson claimed that the Viacom ruling precludes copyright infringement liability for the cover art because it is protected by the DMCA safe harbor, and it is undisputed that the cover art was never the subject of any takedown notices. Robertson analogized MP3tunes’ cover art algorithm to YouTube’s “related videos” algorithm, found to qualify for DMCA protection under Viacom. Per Robertson’s argument, Viacom affords safe harbor protection to any software functions or “architectural decisions” which “enhance user experiences” through a fully automated system operating solely in response to user input. The Court disagreed, finding it not storage at the direction of MP3tunes users, but more of an “automated marketing ploy.” Under Robertson’s interpretation, the DMCA would protect any fully automated software function that “enhances” a user’s experience by, for example, responding to a user’s sideload of one song by automatically sideloading additional songs by the same artist, and that this interpretation of Viacom would stretch the definition of “storage by direction of a user” too far. The Court thus denied Robertson’s motion for reconsideration on this issue.

The remainder of MP3tunes’ motions were largely unsuccessful. Although the Court reversed a finding of direct liability against Robertson for “seeding” Sideload.com with songs with respect to two songs where EMI did not provide copyright registration certificates, the Court refused to revisit its finding that the Court had personal jurisdiction over Robertson. The Court also declined to grant summary judgment to MP3tunes on EMI’s vicarious infringement and unfair competition claims, sending both claims to the jury.

Takeaways

The first observation stemming from the MP3tunes decision is that copyright law in the digital media space is a moving target. Even the partial appeal and reversal of key decisions can create a chain reaction that affects other cases and stakeholders. Accordingly, it is critical that all companies operating in the digital media world pay close attention to ongoing developments.

Here, the Southern District concerned itself as much with what the Viacom decision doesn’t say with respect to willful blindness under the DMCA. While the Court agreed that Viacom requires explicit fact-finding by a court in establishing willful blindness, it also noted that there is a tension in the Viacom decision between the doctrine of willful blindness and the DMCA’s “explicit repudiation” of any affirmative duty on the part of service providers to monitor user content. With no bright line rule, it is arguably difficult for online service providers to ascertain how much attention they must invest in identifying – or ignoring – infringing activity. However, the requirement for fact-finding by courts will likely help copyright owners have the opportunity to invoke a jury to help determine when infringing sites are, as the court characterized it, “looking the other way.”

The Court’s treatment of Viacom’s red flag analysis is likely to be encouraging to copyright owners, as it confirms that evidence other than formal takedown notices (including, but presumably not limited to correspondence between defendants) can be used to show red flag knowledge. This holding will likely help more content creators get past the summary judgment stage on this issue, increasing the pressure on service providers with knowledge of infringement to do more than simply wait until a formal notice is received.